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Subminimum Wages Were Always Deplorable. Inflation Is Making Them Worse.

Activists are pushing to end policies that allow employers to pay some workers less than the $7.25 federal minimum wage.

New York City restaurant workers rally outside Dine Brands shareholder meeting demanding an end to subminimum pay on May 12, 2022, in New York City.

Call it the luck of location. If you happen to live in Alaska, California, Minnesota, Montana, Nevada, Oregon or Washington State, and work in an occupation that relies on tips from customers, you must be paid your state’s full minimum wage for every hour you work. But if you’re a tipped worker in one of 15 (mostly Southern) states, you earn just $2.13 an hour — a subminimum rate that has been in place since 1991. The remaining states — 28 and Washington, D.C. — pay workers more than $2.13 but less than the federal $7.25 hourly minimum.

And the variations don’t end here. For example, New York State ended the subminimum wage for aestheticians, car wash workers, dog groomers, door persons, hairdressers, manicurists, tour guides, tow truck drivers and valet parking attendants in 2020, but left the subminimum in place for wait staff and bartenders.

What’s more, it’s not just tipped workers who are paid lawful, but outrageously low, subminimum wages. Disabled workers employed in a “sheltered workshop,” vocational education pupils, agricultural workers, prisoners, and full-time students employed in retail or service businesses can be paid less than minimum wage, thanks to a provision in 1938’s Fair Labor Standards Act.

But here, too, there are some inconsistencies: To wit, employers can pay workers under age 20 a subminimum wage of $4.25 an hour for no more than 90 calendar days after they begin the job.

Other employment categories are unrestricted, meaning that disabled workers in much of the country can work for pennies an hour forever unless they live in one of the 14 states that have phased out the subminimum for disabled workers.

If you’re confused, you’re not alone, and labor activists are working hard to end the geographic diversity, raise wages for all workers and build worker power.

Before we parse this, here’s some history regarding how this hodge-podge came to be. According to the Center for American Progress, tipping became common after Emancipation, allowing businesses to exploit Black workers through substandard pay. In many cases, tips replaced fixed wages and it was not until 1966 that the Fair Labor Standards Act was amended to require a tiny subminimum wage for workers in restaurants, bars, hotels, and other typically tipped occupations.

The subminimum for disabled workers has its roots in another discriminatory policy and rests on the idea that disabled workers — especially those with intellectual limitations — are less competent and need to be isolated from others. Depression-era Labor Secretary Frances Perkins was a proponent of this idea, and urged Congress to allow a lowered wage for shell-shocked World War I veterans who were having trouble reintegrating into the labor force. Those who “by reason of illness or age or something else are not up to normal production” would benefit, she testified. Her position gained traction and when the Fair Labor Standards Act became law in 1938, it included Section 14(c) to enable employers to pay those deemed disabled an unspecified, but lower, salary.

Fast forward 84 years and the average hourly wage for sheltered workshop participants is currently $3.34. As of July 2020, the most recent data available, the Department of Labor counted 67,288 individuals earning a subminimum wage thanks to 14(c).

Not surprisingly, disability rights groups are working to raise the wage and completely eliminate workshops. Their efforts include legislative advocacy at the state and federal levels, among other strategies.

One key element of their work involves support for The Transformation to Competitive Integrated Employment Act, which was introduced by Senators Bob Casey (D-Pennsylvania) and Steve Daines (R-Montana) earlier this year. The act will phase out the subminimum wage for disabled workers in sheltered workshops over a five-year period. A House version, HR 2733, was introduced by Rep. Bobby Scott (D-Virginia).

“The Transformation to Competitive Integrated Employment bill will allow 14(c) to be gradually phased out. It has a long runway to ensure that we can provide support and services to transition people out of workshops into non-segregated employment. It also ensures that people receive a fair wage in their new jobs,” Cyrus Huncharek, senior public policy analyst at the National Disability Rights Network, told Truthout.

In addition, he says, the bill allocates funding to help businesses accommodate and integrate these new workers.

Huncharek has high hopes for the phase-out and says that it will benefit not only the disabled, but the general population. “Typically, the work done by people in workshops is not stimulating and gives them no transferable skills; they’re stuffing newspapers, wrapping silverware in napkins. At its inception, 14(c) was supposed to be rehabilitative and help the worker develop new skills. We need to assess people’s interests, skills, hobbies, and let this drive the work they seek. We also need to do whatever we can to help them integrate with the general population.”

Frank Pennisi, disability rights and access director at the Southern Tier Independence Center in Binghamton, New York, agrees, and calls 14(c) outdated and inherently unfair and discriminatory. “Sheltered workshops were set up because people believed disabled people couldn’t keep up with people who are not disabled, but this is based on assembly work,” he told Truthout. “Not everyone is meant for this type of employment. Some people are suited for office jobs or retail. We had a client who failed in a sheltered workshop, but when she got a job in a bagel shop, she took orders, wiped down tables and greeted customers. She was there for 20 years.”

Finding the right job for each person, he continues, takes time, patience and creativity. “Over the years, only about 5 percent of people ever left workshops for [non-workshop] jobs,” and since most lack skills needed for employment outside the workshops, advocates need to help them acquire the training they need to transition. “It also takes time to shift expectations so that they are ready to be in an integrated environment,” he says.

Best practices, Pennisi continues, involve a job coach — a process called customized or supported employment — where someone stays with workers until they acclimate to the job. In a large number of cases, he reports, only short-term support is needed. Nonetheless, he acknowledges that “there are some people who will require some degree of coaching for their entire career.”

Regardless, he calls upping the wages that disabled workers are paid, and helping them find suitable integrated employment, a matter of equity and social justice.

This also applies to the tipped workers who comprise 8 percent of the U.S. workforce.

“Our mission has moved from just raising the wage to building worker power and bringing workers together,” says Teofilo Reyes, chief program officer at Restaurant Opportunities Centers United, ROC United. “Front and back-of-the-house workers have joined forces to support each other, recently coming together to comment on how to regulate side work. This is everything from preparing food to cleaning, the jobs that do not involve direct service to customers. We had approximately 1,000 workers weigh in, asking the Department of Labor to limit how much time a boss can demand workers spend on these tasks.”

Workers are also banding together, Reyes continues, to contest racism and sexism, which typically manifest as white workers and women in public-facing roles and men and people of color in the back. Their efforts, he says, aim to “bridge the divide so that workers can support each other’s battles, pressure the bosses to make changes, and protect each other from racial, age and gender discrimination.”

This has also included supporting workers experiencing wage theft, which includes everything from denial of paid meal breaks, to refusal to pay overtime, to forcing servers to share tips with supervisors. All told, ROC United helped workers collect $2 million in lost wages, including more than $375,000 owed to 188 Baja Fresh workers in southern California, in 2021 alone.

This, Reyes adds, shows workers what is possible when they fight back.

Diana Ramirez, senior manager of policy and coalition at the D.C.-based National Women’s Law Center and a former ROC staffer, describes her work as taking place at the intersection of wage and gender justice. “Two-thirds of tipped workers are women, so the subminimum is a big contributor to the gender wage gap,” she tells Truthout. “States with higher minimum wages have smaller wage gaps between men and women working in the same occupations. Women of color hold the majority of these jobs, so this is also a racial justice issue. But overall, women as a group lose more than $1 million over their lifetimes. This is their retirement fund, their college fund.”

The Center’s efforts are concentrated narrowly, with projects in Georgia, Mississippi and New Jersey. In Georgia, the Respect Georgia Workers Alliance was formed in February 2022 and worked with Rep. Teri Anulewicz to pass a bill that protects public sector employees from retaliation following complaints of sexual harassment. Led by 9to5 Georgia, the coalition brought people who Ramirez says “are not usually at the table” together. “Of course, public sector workers are not the only ones who need protection, but it was a great start, a great way to show that regular folks can affect change,” she told Truthout.

Restaurant workers are another key constituency for the Center’s work, since the industry employs more single mothers than any other sector — more than 800,000 laborers — and the need for a higher base pay rate is obvious. A report issued earlier this year by One Fair Wage, a national group that supports replacing the subminimum wage with a $15 hourly fee, with tips on top, found that “the subminimum wage has long forced a workforce that is overwhelmingly female to tolerate inappropriate customer and supervisor behavior because their income is so dependent on customer tips.”

Tsedeye Gebreselassie, director of work quality at the National Employment Law Project, calls it unconscionable that the federal tipped minimum, and the minimum wage itself, have not been raised for more than 30 years. “No other industry says that customers have to subsidize the wages that businesses pay their workers,” she says.

This is why advocates like Ramirez, Reyes and Gebreselassie are supporting two pieces of federal legislation: The Tipped Workers Protection Act (HR 8427) to require all employers to pay every worker the state minimum wage; and the Raise the Wage Act to up the federal minimum wage to $15 an hour and phase out the subminimum for tipped, disabled and young workers.

According to sponsor Alma S. Adams (D-North Carolina), a $15 hourly minimum will raise the wages of 32 million people — half of them women — including one-third of Black and one-quarter of Latinx workers.

Sen. Bernie Sanders (I-Vermont) introduced a comparable bill in the Senate.

“We have to build worker power to win workplace justice,” Ramirez concludes. “Workers need to learn how to assert themselves and be the change in their communities. This goes beyond supporting a piece of legislation. It involves empowerment.”

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